If Robin Leach was the host of "Lifestyles of the Rich & Famous," Airbnb Inc. is trying to make itself into the destination for the super wealthy.

The online marketplace and short-term rental site is reportedly in the process of buying Canadian-based Luxury Retreats International Inc., as it looks to expand into a market catering towards the high-end market. Bloomberg first reported the news, citing people familiar with the matter. (For more, see also: How To Make Money With Airbnb: Risks & Rewards.)

Growth Strategy

The purchase price would be worth more than $200 million, according to The Financial Times, but no more than $300 million, per Bloomberg, with the acquisition being paid for in cash and stock, according to Bloomberg's sources. At these levels, it would be Airbnb's largest acquisition to date.

Airbnb, led by CEO Brian Chesky, is looking to continue to expand its tourism business and grabbing Luxury Retreats, which boasts more than 4,000 properties around the world, including many in Canada, would be a way to achieve growth, though it's unclear how much it will help.

"It doesn’t sound like it’s going to massively accelerate Airbnb’s already rapid growth rate — it seems more like a way to expand in a specific niche that’s very complementary to the core Airbnb business," Jackdaw Research analyst Jan Dawson said via email. "Airbnb has luxury properties, but it’s not necessary a specialty, so bringing in a company that focuses on that space is a great way to give it the focus it needs and branding to match."

Airbnb's investors are likely to post major profits if the company, valued at $30 billion, proceeds with an initial public offering as early as this year.

Airbnb does approximately $3 billion in bookings per year, while Luxury Retreat is thought to do approximately $150 million. Airbnb also recently launched a tours and experiences business in cities worldwide where travelers can book tours and activities from local experts, according to a Recode report. (For more, see also: Airbnb Inc.)

Economics

The San Francisco-based Airbnb has raised a total of $3.95 billion in funding in 20 separate funding rounds, according to Crunchbase, indicating that investors continue to see opportunities in the company, as it seeks to compete against the likes of Priceline Inc. (PCLN) and Expedia Inc. (EXPE). By bringing Luxury Retreats—which is profitable—into the fold, Airbnb would further strengthen its brand around the world, as well as allowing consumers to experience venues, from Caribbean villas to Sir Richard Branson's Necker Island, which costs $80,000 a night and can sleep up to 34 people.

Manhattan Venture Partners analyst Santosh Rao told the Financial Times that the deal would probably be accretive to Airbnb's margins, noting “The margins for high-end [accommodation] always end up being higher."

 

 

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